E85: Will it Save You Money?

Spikes in gas prices often turn attention toward alternative fuels. Ethanol alcohol, in the form of E85, is occasionally in the news due to political debates, automotive marketing and the controversial rise in global food prices. GM (the largest proponent) and other manufacturers each sell a few so-called flexible-fuel models that can run on either straight gasoline or E85. Is it worthwhile for you?

PROS+ Renewable fuel+ Uses up to 85 percent less imported petroleum+ Less money goes overseas+ You don't have to pay a premium for a flexible-fuel model

What is E85?

E85 fuel is 85 percent ethanol alcohol and 15 percent gas. The gasoline ensures that the engine starts in cold weather, because straight alcohol won't (E85 is actually E70 in the winter to ensure this). The ethanol in E85 comes from corn; most of the kernel is still available for use in traditional products such as animal feed.

Can My Car Use E85?

The 2011 Chevrolet Equinox is flex-fuel capable; it's one of a number of GM models that can run on E85.

If it's a flexible-fuel vehicle, it can. Roughly 7 million cars on the road today can run on E85. If you were unaware, you're not alone. A recent GM study found that roughly 70 percent of its flex-fuel vehicle owners didn't know they could use E85, and fewer than 10 percent did so.

A flex-fuel model can burn any combination of E85 and straight gasoline, so owners can fill up with either fuel at any time. Technically, a non-flex fuel model can be modified to run on E85, but it is far from being cost-effective.

Will E85 Save Me Money?

At its current price per gallon, E85 doesn't save you money, and it might cost you more. As of August 2012, a gallon of E85 was approximately 11 percent less than the cost of a gallon of gasoline nationally, according to e85prices.com. However, E85 produces 27 percent less energy per gallon than gasoline, so on average it ends up costing more.

For example, the flex-fuel 2010 Chevrolet Impala equipped with a 3.5-liter V-6 engine gets an EPA-estimated 18/29 mpg (city/highway) on gasoline and 14/21 mpg when burning E85. The acceleration is pretty much the same, but the car's range is shortened. In other words, you'll be filling the tank more often when using E85.

Do the math and you'll discover that E85 must be priced roughly 28 percent less than gas just to break even. For example, if gasoline is $3 per gallon, E85 would have to be priced below $2.16 per gallon. There are regions in the Corn Belt where E85 reaches this threshold, making it cost effective.

How Available is E85 Fuel?

On a national level, E85 is hardly widespread. The highest concentration of filling stations is in corn-growing states such as Illinois, Iowa and Minnesota. Overall, there are roughly 2,100 E85 stations across 44 states, according to the U.S. Department of Energy. Availability remains poorest in the South and the Northeast — where it's hard to produce ethanol locally.

So Where is the Benefit?

The 2011 Nissan Armada is flex-fuel capable, one of the few models from Japanese automakers.

The best reasons to buy an E85 vehicle are to decrease U.S. dependence on petroleum — which is non-renewable and comes mainly from foreign countries — and to keep more of your money in this country.

E85 also has environmental benefits, although the degree is in question. A flex-fuel car burning E85 has different levels of tailpipe pollutants, but it's not dramatically better overall than gasoline exhaust. Separate from true pollution emissions, E85's output of carbon dioxide — a greenhouse gas — is again comparable to that of gasoline, at the car's tailpipe. The theoretical benefit is that the carbon in ethanol comes from corn plants, which, in a sense, recycle the carbon.

In comparison, petroleum is carbon that was trapped underground for millions of years before being released into the ecosystem. The National Ethanol Vehicle Coalition says E85 reduces CO2 by about 36 percent to 42 percent versus gas. Still, scientists point out that petroleum is used to plant, fertilize, harvest, process and transport E85.

Will E85 Prices Come Down?

Ethanol prices are already subsidized in some states. Buyers in Illinois pay no sales tax, which brings down the posted price per gallon (tax is included in per-gallon prices for straight gasoline, not added on top of the total). Price hinges on supply and demand and economies of scale. Demand recently jumped when the additive MTBE was found to be polluting groundwater. States that used MTBE are switching to ethanol as an octane booster and oxygenate, which reduces summertime air pollution from gasoline evaporation.

Ethanol proponents say an oft-cited study that claimed ethanol takes more energy to produce than it gives back is no longer accurate. According to NEVC, the overall energy advantage over gasoline is 3 to 1. This ratio is expected to reach 9 to 1 when the industry moves away from food crops and toward waste vegetation and/or plants that are simpler and cheaper to grow, harvest and process. Switchgrass, which President George W. Bush mentioned in one State of the Union address, is one such plant.

As alternative fuels go, biofuels like ethanol and biodiesel have great advantages in the real world. They can be distributed and dispensed like conventional liquid fuel, and used in vehicles that cost automakers very little in terms of additional cost. The same cannot be said of hybrids, which force consumers to pay a higher sticker price.